India soldato in Kashmir (La Presse)

China, India Compete for Influence in Cash-strapped Iran

Rivalry between India and China has always been marred by tension and border disputes, which culminated historically in three military conflicts between the two Asian heavyweights.

Rising Tension Between Nuclear-Armed Neighbors

While New Delhi is growing wary about Beijing’s strong relations with India’s arch foe Pakistan, China looks with suspicion at Indian military and economic activities in the disputed South China Sea.

Tension between the nuclear-armed neighbors escalated in deadly clashes along their lengthy frontier earlier this year, with the two countries trading accusations for who was to blame for the violence.

China and India Competing to Gain Influence in Oil-Rich Iran

Now, the two rivals are turning to oil-rich Iran, where the Asian giants are completing to gain a foothold. India and China see Tehran as a strategic gateway to boost their influence in Afghanistan and Central Asia. Their rivalry now focuses on the strategic Chabahar Port in southeastern Iran.

Located on the Gulf of Oman, the port serves as Iran’s only oceanic port and is close to international waters in the Indian Ocean. The seaport consists of two separate terminals, each of which has five berths built in an area of 485 hectares.

India’s 2016 MoU to Develop Chabahar Port in Iran vs. China’s 2015 Deal With Pakistan to Build Gwadar Port

In 2016, India signed a $1.6-billion memorandum of understanding (MoU) with Iran during Indian Prime Minister Narendra Modi’s visit to Tehran to develop the Chabahar port, which is located 1,400 kilometers from India’s commercial capital Mumbai. The MoU also included the construction of a railway line between the port city of Chabahar and Zahedan in southeastern Iran.

The agreement came months after China signed an agreement with India’s neighbor Pakistan in 2015 to develop Gwadar port, which is located only 350 km by land and 140 km by sea from the port of Chabahar.

India sees the development of the Chahabar port as an opportunity to secure connectivity to Afghanistan and Central Asia, bypassing Pakistan.

India also signed a trilateral agreement with Iran and Afghanistan in 2016 for the transfer of Indian goods to Afghanistan via Chabahar port, ending New Delhi’s dependence on Pakistan’s ports.

US Withdrawal from the Iran Deal and India’s Changing Relationship With Iran

In May 2018, the United States unilaterally withdrew from a 2015 nuclear deal with Iran and re-imposed sanctions on the Islamic Republic. Despite the fact that Washington had agreed to a waiver for the Chabahar port and the Chabahar-Zahedan rail project, India halted its oil purchases from Iran in compliance with the US sanctions.

Angered by the Indian move, Iran moved to drop New Delhi out from the Chabahar-Zahedan railway project along the border with Afghanistan in July of this year, citing India’s delay in fulfilling its financial obligations under their agreement.

“I never thought that an independent country like India would be willing to follow the US footsteps and refuse to buy oil from us,” Iran’s First Vice President Ishaq Jahangiri said in statements that reflect Tehran’s anger over the Indian decision to halt oil purchases from Iran.

China and Iran Sign $400 Billion Strategic Partnership

One month after the move, reports emerged that energy-hungry China and Iran signed a $400-billion strategic partnership pact. According to media reports, China will invest $120 billion into transport and manufacturing infrastructure in cash-strapped Iran as part of the deal. The agreement will also allow Tehran to facilitate the infusion of about $280 billion from Beijing, which wants to buy oil from Iran.

Several reports also emerged about Chinese-Iranian talks over China’s participation in the Chahabar-Zaheden railway project as well as Beijing’s interest in taking part in the development of the Chahabar port.

India Scrambles to Respond

These reports have troubled India, leaving Indian officials scrambled to save their country’s share in the Chahabar port and keep China away from the port development project. The Indian worries were evident in the surprise visit by Indian Defense Minister Rajnath Singh to Iran for talks with Iranian officials earlier this month. Indian Foreign Minister S. Jaishankar also made a stopover in Tehran for talks with officials there.

The visits reflected India’s growing concerns from being dropped out of the Chahabar port development and being replaced by its geopolitical rival China.

According to observers, China’s elimination of India from the Chahabar port project will be a major success to Beijing as it will mean denying New Delhi access to Afghanistan and Central Asia, something India does not want to lose.

So far, Iran did not exclude India from the Chahabar port project. On the contrary, Tehran is using this card to pressure New Delhi to ignore the US sanctions and fulfill its financial obligations in the project or risk losing its share to its geopolitical rival China.